LONDON – Oil fell to a seven-week low near $50 on Wednesday, after the U.S. government reported a ninth straight weekly rise in crude inventories and a build in gasoline stocks ahead of summer.
U.S. crude oil futures settled down $1.64 to $50.22 a barrel on the New York Mercantile Exchange (search), deepening Tuesday's three-percent decline and hitting the lowest level since Feb. 22. London Brent was down $1.43 at $50.48.
Prices have fallen almost 14 percent from last week's record high above $58 a barrel on rising production from Saudi Arabia and signs that a two-year acceleration in global demand growth is finally beginning to ebb.
The latest decline came as the U.S. government's Energy Information Administration (search) said crude inventories, already at the highest level in nearly three years, rose another 3.6 million barrels to 320.7 million.
Gasoline stocks climbed by 800,000 barrels to 213.1 million, breaking a five-week slide that has raised anxiety over supplies ahead of the summer driving season.
"This is all-around bearish. Demand numbers were so-so and import numbers were big," said Jan Stuart, analyst at Fimat USA bank.
Tuesday's report from the International Energy Agency (search) showing Chinese oil consumption growth slowing sharply early this year has already helped deflate prices, which are still up 18 percent since the end of 2004.
"The April IEA report supports our belief that rising inventories, moderating demand growth and Saudi Arabia's commitment to put more oil into the market will put downward pressure on oil prices," Merrill Lynch said in a report.
The IEA revised down global demand growth this year by just 50,000 barrels per day (bpd), saying that the risk to demand — which has consistently outstripped expectations — now appeared to be to the downside for the first time in two years.
OPEC powerhouse Saudi Arabia added pressure to prices by telling oil majors and Asian refiners that it would boost their May crude oil supplies by 10 percent or more, effectively putting as much as 500,000 bpd of new oil on the market.
Middle East Gulf producers are eager to lift output now to encourage stock-building in the coming months, creating a buffer for strong demand later this year, although OPEC members Nigeria, Algeria and Venezuela have said more oil is unwarranted.
OPEC President Sheik Ahmad al-Fahd al-Sabah said this week the group was on track to boost supplies by 500,000 bpd next month, pressing ahead with a second increase despite prices having slipped back below the cartel's $55 threshold.
The Organization of the Petroleum Exporting Countries raised output limits by 500,000 bpd in March to 27.5 million, leaving room for a second rise if oil prices remained high.